If rent is paid by any person (either an individual or a Hindu Undivided Family (HUF) who is subject to tax audit or any other person) to another person for an amount exceeding Rs 50,000/- per month, then they must deduct tax at source as mentioned in the section
As the name suggests, tax deducted at source (TDS) is a method of collecting taxes where a person responsible for making certain payments, like salary, rent, interest payment, and so on, deducts a certain percentage of tax before making the payment. We take a look at a few common instances where TDS payment is necessary.
Salary payments – TDS Under Section 192
As the name suggests, any payment under an employer-employee relationship, where the total payments during the financial year exceed the minimum income not chargeable to tax, TDS shall be deducted on each payment as calculated under the current slab rates in force.
Rent Payments – TDS Under Section 194I
If rent is paid by any person (either an individual or HUF who is subject to tax audit or any other person) to another person for an amount exceeding Rs 50,000 per month, then they must deduct tax at source as mentioned in the section. “For movable property such as plant and machinery, the rate of TDS is two per cent and the rate for immovable property such as land, building, or furniture and fittings is 10 per cent,” says Ritika Nayyar, partner, Singhania & Co.
Contractor Or Professional Payments – TDS Under Section 194C/194J
TDS under Section 194C deals with contractual payments for carrying out work such as advertising, broadcasting and telecasting, carriage of goods or passengers other than railways, catering, job work, etc. If amount payable in single contract is above Rs 30,000/- or aggregate payments in a financial year exceed Rs 1,00,000/-, then TDS needs to be deducted @1 per cent for individuals/HUF and two per cent for other cases.
“194J refers to TDS on the following payments for professional or technical services if they exceed Rs 50,000/- in a financial year,” says Nayaar.
These may fall under certain types.
- Professional services such as medical, architecture, advertising, legal, engineering, etc.@10 per cent
- Technical services such as managerial, consulting, technical @ two per cent
- Royalty on fee for using patents, trademarks, etc., @10 per cent
Interest Payments
TDS under Section 194A @10 per cent is applicable on interest payments on deposits if it exceeds Rs 10,000/- in a financial year. “However, if the interest is paid by banks, cooperative societies or post offices, then the threshold is Rs 1,00,000/- for senior citizens and Rs 50,000/- for others,” says Nayyar.
Purchase Of Immovable Property
TDS under Section 194-IA is applicable on the sale of immovable property. In case the purchase value exceeds Rs 50,00,000/-, then the buyer of the property is obligated to deduct tax at source @one per cent of the sale amount. This obligation is on the buyer, not the seller.